Why can’t Pumped-in-the-USA crude be exported?
In 1973, some members of the Organization of Petroleum Exporting Countries stopped selling crude to the U.S. in retaliation for its support of Israel in a war with Egypt and Syria. The oil embargo,which sent crude prices soaring, scared the pants off U.S. policymakers. In response, Congress made it illegal to export U.S. oil without a license, as part of an effort to bolster conservation and cut oil imports. Later, exceptions to this rule were added, allowing oil from Alaska’s North Slope and from the Strategic Petroleum Reserve to exit the country.

Are a lot of licenses granted?
Not really, and most are for export to Canada. Valero Energy, for instance, has gotten a license to export Texas crude from Corpus Christi to its refinery in Quebec, Canada. The Bureau of Industry and Security, which handles license requests, doled out 66 in 2012 and 45 in 2011. The U.S. exported about 56,000 barrels a day of oil in October, according to federal data. That’s less than 1% of the 7.7 million barrels a day that energy companies in the U.S. pumped that month.

What would it take to end this de facto ban?
Congress would have to amend an existing law. This doesn’t seem likely any time soon.

If the U.S. is talking about exporting oil, does that mean the country is energy independent?
No. The U.S. imports 25% less oil than it did five years ago. But foreign oil still makes up about half of the crude that U.S. refineries turn into gasoline, diesel, jet fuel and so forth. America doesn’t come close to consuming all of these refined fuels, which unlike oil can be exported, and ships much of them abroad.

But when it comes to oil, refiners are particular about the flavor of crude they use. The rise in fracking has unleashed a large volume of light, sweet crude oil – while American refineries along the Gulf Coast are generally set up to handle heavier crudes from Mexico and Venezuela. So there’s a mismatch. U.S. oil producers want the option of exporting some high-value light oil, leaving refiners to import lower-cost heavy oil.

Why does Exxon want to end the export ban?
Exxon has long supported free-trade policies, and argued that the same rules of trade should apply to oil and natural gas as to any other product made in the U.S.A. Beyond the ideology, too much crude from Texas and North Dakota has been pushing down oil prices in the U.S. Exxon, as the nation’s largest energy producer, wouldn’t mind getting higher prices for its crude.

Why can companies sell oil for higher prices outside of the U.S., and how much higher?
A barrel of oil sold in the U.S. used to fetch about the same price as an equivalent barrel sold internationally. But U.S. prices began sinking lower in 2011, as crude gushed from domestic wells faster than refiners could process it. Today, the going price for a barrel of U.S. crude is $97.50. That’s about $11 less than a barrel sold in Europe.

Who else would be in favor of exporting crude?
Other oil producers. Lifting the ban would allow them to find the best prices around the world.

Who would oppose exports?
Refiners, who like the abundance of U.S. oil, and the low prices they now pay for it. And maybe drivers, since cheaper crude oil translates into cheaper gasoline, which benefits consumers.

If the U.S. did allow oil exports, could that affect the global price of oil?
Possibly. The U.S. is overtaking Russia as the world’s second-biggest oil producer, behind Saudi Arabia. Sending those barrels onto the world market would add to supplies and take pressure off the price. In fact, the U.S. oil boom is already adding slack to the global market because the country is importing less crude. In theory, it’s possible exports of U.S. crude could lead to lower global oil prices and, by extension, lower gasoline and diesel prices.

Comments (5 of 10)

The 10 biggest oil consuming nations account for more than 58% of the world's total oil consumption per day. The United States is the world's biggest oil consumer, followed by China, Japan and India.

8:15 am February 16, 2014

RTEXAN wrote:

I'm with you Joe Skooler, build refineries here to process light crude, provides more jobs and keep money in us economy.

10:02 pm December 17, 2013

Joe Skooler wrote:

Why don't the refiners is the U.S. set up production for sweet crude oil given the big supply and the export restrictions? Can't they make more fuels per barrel and then export the fuels?

7:45 pm December 14, 2013

Jeffrey J. Brown wrote:

Meanwhile, back here in Reality, EIA data show that the US is currently reliant on crude oil imports for about half of the crude oil processed daily in US refineries. For current info, you can search for: EIA Weekly Supply Estimates.

Given an (inevitable) ongoing production decline in an oil exporting country, unless they cut their consumption at the same rate as the rate of decline in production, or at a faster rate, the resulting net export decline rate will exceed the production decline rate, and the net export decline rate will accelerate with time. Furthermore, if the rate of increase in consumption exceeds the rate of increase in production, a net oil exporting country can become a net importer, prior to a production peak, e.g., the US and China.

I have continued to be surprised at how much attention is given to the top line production number globally, and not to the bottom line net export number, especially as the developing countries, led by China, have (so far at least) consumed an increasing share of a declining post-2005 Global volume of Net Exports of oil (GNE). At the 2005 to 2012 rate of decline in the ratio of GNE to the Chindia Region's Net Imports of oil (CNI), the GNE/CNI ratio would approach 1.0 in only 17 years, which means that China & India would theoretically be consuming 100% of GNE. For more info on “Net Export Math,” you can search for: Export Capacity Index.

While currently increasing US crude oil production is very helpful, it is very likely that we will continue to show the post-1970 “Undulating Decline” pattern that we have seen in US crude oil production, as new sources of oil come on line, and then inevitably peak and decline (2013 annual US crude oil production will probably be about 22% below our 1970 peak rate).

The very slow increase in global crude oil production since 2005, combined with a material post-2005 decline in Global net oil exports, have provided considerable incentives for US oil companies to make money in tight/shale plays. But I think that the assertion by many in the Cornucopian camp that shale plays will result in a virtually infinite rate of increase in global crude oil production is wildly unrealistic.

We are still facing high–and increasing–overall decline rates from existing oil wells in the US. At a 10%/year overall decline rate, which in my opinion is conservative, the US oil industry, in order to just maintain the 2013 crude oil production rate, would have to put online the productive equivalent of the current production from every oil field in the United States of America over the next 10 years, from the Gulf of Mexico to the Eagle Ford, to the Permian Basin, to the Bakken to Alaska.

On the natural gas side, a recent Citi Research report (estimating a 24%/year decline rate in US natural gas production from existing wells), implies that the industry has to replace virtually 100% of current US gas production in four years, just to maintain a dry natural gas production rate of about 66 BCF/day. Or, at a 24%/year decline rate, we would need the productive equivalent of the peak production rate of 30 Barnett Shale Plays over the next 10 years, just to maintain current production.

7:25 pm December 13, 2013

Jason wrote:

Export restrictions also hold down the number of jobs created in the U.S. Domestic energy provides exactly the type of good paying middle class jobs that we have been losing for a generation. Free trade benefits everyone; that is why we do it in most every industry. If we export crude according to market dynamics, GDP and GDP/capital will be higher. Gas prices will be higher than they otherwise would be in certain inland areas close to production basins, but would be entirely unaffected in coastal regions that import crude from overseas or transport it from the interior of the U.S. Refineries already export gasoline and diesel, etc. Our refineries are geared to refine imported heavy and sour crude because that was all that was available several years ago. It would be better for everyone if we sold off the excess light sweet that we produce and imported the cheaper heavy stuff.